TMI Blog2012 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ok of savings bank account of Shri Mohd. Zakir Hussain credit balance in the savings bank account amounting to Rs.34,28,415/- out of which Shri Mohd. Zakir Hussain issued the cheque of Rs. 20 lacs in favour of the firm, clearly proves the credit worthiness - CIT(A) was correct in deleting the addition made on account of loan received from the partner - in favour of assessee. Not being able to prove genuineness of transaction and credit worthiness in respect of the loan of Rs. 5 lacs each received from Jivanlal, Premlal, Ramkumar and Laxminarayan,no reason to interfere with the findings in confirming the credit received from these persons, accordingly - against assessee. Disallowance of claim of expenditure on account of details of Tools, Auzar and Tagari - Held that:- This expenditure is essentially required to be allowed as revenue expenditure as they are the consumables used in the business of construction life of which is less than one year - in favour of assessee. Confirm the action of the CIT A) in assessing the income of Rs.60,85,200/- in place of total income assessed by the Assessing Officer at Rs.1,57,94,180/-. - ITA No. 344 & 357/Ind/2011 - - - Dated:- 20-6-2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Rs.l,53,50,552/ - under the following heads. i. addition of deposits in bank account u/s.68 Rs.40,20,000/ ii. revenue expenditure treated as capital expenditure Rs 5,96,653/ iii.Unexplained expenditure is u/s.69C Rs.29,28,490/- iv. work in progress in the name of material appearing in balance sheet Rs. 34,255/- v. difference in amount of sundry debtors of Indore Municipal corporation (in short IMC) appearing in Balancesheet Rs.77,71,154/ Rs.,53,50,552/- 4. The AO thus determined the total income at Rs.l,57,94,180/- against returned income of Rs.l,87,000/and in this process made an addition aggregating Rs.l,56,07, 180/-. 5. Before the learned CIT(A) the assessee has broadly accepted the discrepancies noted by the Assessing Officer and a recasted balance sheet was filed. In the recasted balance sheet, the assessee surrendered a sum of Rs. 36,04,994/-. After recording detailed findings, the learned CIT(A) confirmed the addition of Rs. 60,85,200/- on account of alleged unexplained source of capital. The CIT(A) has deleted the addition of Rs. 20 lacs in respect of loan taken from partner of the firm and also the addition made on account of disallowance of expenditure und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three conditions prescribed u/s.184. It is further contended that their partnership was evidenced by an instrument wherein individual shares were specified and certified copy of the deed were also filed and proper compliances were made from time to time before AO and the assessment was not completed u/ s.144, hence the AOs action was not justified law in treating the status as AOP as well disallowing remuneration as well interest of partners. 4.2.1 The appellant in making such submission has conveniently ignored the basic facts available on record that there was no genuine partnership firm in existence for the entire previous year 2007- 08 and so called partnership came into existence only through a partnership deed executed on 12.01.2008. No books of accounts were ever produced before AO and as the detailed discussion made by the AO reveals no proper records of business were maintained and thus there was definite non-compliance on the part of the appellant to the requirement of notice u/s.142(1) and merely because - assessment order has been passed u/s.143(3) those noncompliances would not stand obliterated. Further still, the manner in which the patently wrong and manipul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count given whereas the partner in his statement categorically admitted that entire amount i.e Rs.84,44,675/- from IMC was received after 01st April. Thus it clearly emerges that no proper and regular books of accounts were maintained and the P L account and balance sheet which were filed alongwith with return of Income were totally unreliable, manipulated and not supported by proper records and vouchers. Thus, in this case, it will be only appropriate to determine total income treating the case as a no accounts case by taking the position of assets being realizable from IMC and other balances and excess of the same over established and verifiable liabilities. 4.3.2 This view gets support from the fact that in the Income Expenditure account filed with the return of income against total works contract of Rs.86,48,619/- nearly 70% of the amount has been claimed as labour expenses at Rs.60,64,033/- and material purchased claimed at Rs.6,82,855/- I.e. barely 8% of the gross contract receipts. The nature of work has not been specified but unless it is a pure labour oriented work, the component of labour expenses cannot be so high compared to the gross receipt. The Income Expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussion about the verifiability of this unsecured loans it was submitted by the AR present that an amount of Rs.5,00,000/- each from four agriculturists was taken and in support thereof the AR sought to file rin pustika as well election ID card in respect of three of such persons and it was claimed and contended that these farmers had capacity to advance such loans and balance amount of Rs.20 lakhs was advanced by one of the partner who had run the business earlier a~ proprietorship, Mr. Mohd. Zakir and such amount was fully explained having come from the bank account of Mr. Zakir and in support thereof copy of bank passbook of Mr. Zakir of bank account of Bank of India, Sanyogitaganj Branch with customer ID No. 101090540 was also filed wherein the amount of Rs.20 lakhs was shown debited in his account as advanced to M/ s. Baba Sales. 4.4 In the above backdrop of facts on record, the various additions made by the AO in assessment order are considered. The addition of Rs.40,20,000 /- being unexplained amount deposited in bank account is now represented by unsecured loans in the name of four so-called agriculturists, one of the partner and miscellaneous receipts of Rs.20,000 /- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e four persons cannot be accepted as genuine unsecured loan standing on the balance sheet date. So is also the position of the miscellaneous loan of Rs.20,OOO for which no absolute details or particulars of the names of the persons etc, has been given. 4.4.3 Lastly coming to the sundry creditors standing in the name of six persons, viz.,M/s. Arpreet Neema Contractor, M/ s. Saluja Enterprises, M/ s. Ashwin Sharma Contractor, M/ s. Rahul Batera Contractor, M/ s. Mohd. Nazir Khan and MIs. Ashish Neema Contractor, again it has to be observed that these are the same names appearing as appeared in the original balancesheet and the balancesheet was found to be a cooked up affair and neither at the AO stage nor at the appellate stage, materials and evidences has been brought on record to establish their identity and bills and vouchers etc., for establishing the outstandings for work executed or for that matter material supplied etc. Thus, this liability standing in the name of sundry creditors also cannot be accepted. 4.4.4 To sum up, against a total asset position of Rs.87,70,311/- the only liability established stands at Rs.6,85,112/- for partners capital account balances and' Rs.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs. 1,87,000/- was assessed by the Assessing Officer at Rs.1,57,94,180/- which is just double the amount of gross contract receipts. From record we find that the Assessing Officer has found discrepancy in the audited accounts of the firm, therefore, the addition was made on account of deposit in the bank account, unexplained expenditure u/s 69, difference in the amount receivable from Indore Municipal Corporation, etc. The addition made on account of the loan taken from four agriculturists - Rs. 5 lacs from each, totaling to Rs. 20 lacs was confirmed by the learned Commissioner of Income Tax (Appeals). In respect of the loan of Rs. 20 lacs received from Mohd. Zakir Hussain, partner of the assessee firm, the learned Commissioner of Income Tax (Appeals) deleted the same after observing that the amount was received from the partner whose identity was established and the amount was received from banking channel. Thereafter, following the verdict of the Hon ble jurisdictional High Court in the case of Metachem Chemical Industry; 245 ITR 160 he deleted the addition. We also find that this amount was brought by the partner through account payee cheque out of his savings bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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